If you love getting away (and really, who doesn’t?), you’ve probably thought about buying a cottage or chalet for family getaways.  Whether you prefer the summertime setting of a lakefront property, fishing, and campfires, or you’re more of a skiing/snowboarding, drinking wine by the fire type, the idea of owning a second property at one of these destinations is very tempting.

Pros Of Owning A Vacation Property

For those of you who have ever had the experience of bolting out of the city every Friday afternoon to race everyone else to the cottage, the answer is clear: It’s Yours!  To have your own property that you can go to at the drop of a hat is very enticing. 

Avoiding having to make reservations, think carefully about every single thing you’ll need, and stressing about whether you’re going during an expensive time of the year are all perks to having a place that’s yours just waiting for you.

Flexibility aside, there’s also the potential for rental income.  Renting out your cottage or chalet for a few nights or weeks at a time commands a much higher rental income than, say, renting out your home to someone for a year. 

If you’re willing to deal with renters (or pay someone to manage all of that), it’s possible you can have most of the mortgage paid for you while still enjoying all the perks of having your own place.

Cons Of Owning A Vacation Property

Of course there are drawbacks.  For one, it’s a LOT of debt (for most of us, anyway).  Don’t make the mistake of buying a place only to realize you have to work more to pay for it and now have almost no time to actually enjoy it. 

Those payments can really mess up your cash-flow and limit other options in your life.  Maybe you want to renovate your current home or move to a larger one because you had a kid.  Maybe you decide you want to visit Europe during the summer.  These options will be severely limited if you’re paying for a second property.

Let’s look more closely at that trip to Europe.  If you’ve committed to buying a vacation property, you’re going to feel a bit silly going anywhere else when you have time off.  After all, what’s the point of making mortgage payments at the same time you’re buying plane tickets and paying for hotel stays somewhere else?

If you think there’s a chance you’ll want some flexibility in where you travel, buying might not be the best option.

How To Compare Your Options

Let’s take a look at some hypothetical numbers.  On the buying side, you’re going to have costs every single month until you pay the property off, and some, such as taxes and utilities, forever.

Compare that to renting, where you’re paying a very high daily or weekly rate, but you’re not paying for the time you’re not there.

As an example, let’s say the running costs for your cottage are $2,000 a month (including mortgage and all other fees).  That’s $24,000 a year.  Let’s compare that to the exact same property right beside this one which you can rent for $200 a night or $6,000 a month.

OPTION 1 – You want to go to the cottage every weekend for the summer, plus 2 full weeks of vacation.  That’s 2 nights x 4 weeks x 5 months, for a total of 40 days plus our 2 weeks, for a total of 52 days in the year that you’ll be there.  At $200 a night, that’s $10,400.

OPTION 2 – You’re going to stay for the entire summer (5 months).  At $6,000 a month, that’s $30,000.

Now we see roughly where the break-even point is.  Even if you can get away for all the days in option 1, it’s still cheaper to rent than buy.  As we get to longer stays like in option 2, renting is starting to get more expensive.

Of course there are all the additional considerations.  If you can rent the property out while you’re gone you can drastically reduce your annual expenses.

On the other hand, if you can’t realistically get away as much as you want, renting might be the better option.

Lastly, of course, is the fact that the property you buy should appreciate in value.  For this you’ll have to consider your time-frame, how long you want to keep the property, and whether that money could be better invested somewhere else.

Don’t fall into the dream of having a cottage or chalet without taking a serious look at the costs involved.  Resenting your decision will ruin every vacation you take, while the right one will give you the freedom to enjoy every minute of it.